Bid bonds and financial pre-payments usually come in combination with a fixed penalty. An interested bidder has to pre-qualify either by delivering a bank guarantee (bid bond) or by placing cash in a designated account (financial pre-payment). If the bidder is awarded, but the contracted project is delayed or not completed, the money is not returned to the winning bidder. This fixed amount thus constitutes a penalty.
The bid-bond may at the same time serve as an indication of the bidder’s financial competence (see bidder restrictionsBidder restrictions are requirements to the bidders, rather ...). In case of multi-item auctions, it is common to set the financial pre-qualification as an amount per kW capacity offered in the bid, while the financial pre-qualification in single item auctionAn auction is a market mechanism with the aims of allocating... can be set regardless of project capacity. A financial pre-qualification can also be divided into two steps, with a first bid bond/payment due before participating in the auctionAn auction is a market mechanism with the aims of allocating..., and the second bid bond/payment due after being awarded.
Bid bonds applied in different auctionAn auction is a market mechanism with the aims of allocating... schemes:
– Portugal, Wind and biomass: €10/kW for first bid bond, €25/kW for second
– Germany, Solar PV: €4/kW for first, €50/kW for second
– Spain, On-shore wind and biomass: in case of non-compliance by the agreed date (48 months after being awarded), the contracting authority would enforce the bank guarantees of 20€/kW.
– Italy, Multiple technologies: 5% of estimated investment costs as first bid bond, 10% of estimated investment cost as second bid bond
– Croatia, Multiple technologies: 50 HRK/kW (approx. €6.5) for first bid bond, 300 HRK/kW (approx. €40) for second
– Denmark: In the Danish offshore wind auctionAn auction is a market mechanism with the aims of allocating... of Anholt a fixed penalty was charged in case of delayed grid connection of the last turbine. The penalty was between DKK 100 and 400 million (€ 13.4 and 53.7 million) depending on the timing of the delay announcement. Combined with a reduction in supportJust like administratively set support, auction-allocated su... level in case of delayed grid connection of the first turbine, the penalty has been considered the main reason for poor auctionAn auction is a market mechanism with the aims of allocating... participation (the auctioneer received only one bid)